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4.

SECTOR-SPECIFIC INDUSTRIAL ATTRIBUTES

Hydrocarbon Processing Sector


Energy drives Albertas economy and
its feedstocks drive a globally recognized
and competitive petrochemical
processing sector.
With massive reserves of conventional and shale oil and
gas as well as bitumen, a highly skilled technical workforce
and the pipeline, road and rail capacity needed to move
feedstock and product to major North American and Asian
markets, the Greater Edmonton area is both connected
and competitive for petrochemical processing or the
supply and servicing of this key sector.

Sector snapshot
Edmonton is a member municipality of Albertas Industrial
Heartland, home to global leaders in petroleum and
petrochemical processing and Albertas largest
petrochemical processing cluster. Its strategic location
between major resource extraction areas, natural storage
capacity and ready access to a skilled and educated
workforce have contributed to the areas reputation as the
primary petrochemical and hydrocarbon processing centre
for Alberta and Canada. This region is responsible for a
signicant portion of the $31 billion (2012)1 earned from
Albertas chemicals and petroleum rening sector.
Revenue is earned from the following subsectors:2

$20 billion rened petroleum products

$11 billion chemical products including

43% from synthetic resins

33% from basic chemicals

23% from fertilizers and other chemicals

The sector employs nearly 14,000 people in Alberta.3


The Greater Edmonton area represents approximately
one-third of Albertas overall labour force and its wellestablished role in this sector means local availability of a
skilled and experienced workforce.

1
2
3
4

Edmontons industry has ready access to primary


petrochemical feedstocks of petroleum, hydrocarbon
liquids, natural gas and natural gas liquids as well as other
agriculture-based feedstock important for fertilizer
production. The area is at the centre of a comprehensive
rail and pipeline network that moves goods in and around
the region, and from the region to all key North American
markets and west coast ports serving Asian markets.
The following summarizes the petrochemical product slate
available and produced within the Greater Edmonton area.

Agricultural
chemicals
Anhydrous
ammonia and
aqua ammonia

Heating fuels

Petroleum coke

Hydrogen
peroxide

Polyethylene

Industrial gases
and steam

Propylene

Butane

Iso-octane

Carbon dioxide

Molybdenum
and Vanadium

Condensates
and heavy
distillates
Ethane
Ethylene
Granular urea

Monoethylene
glycol
Natural gas
liquids
Oilseed-based
products

Propane
Resins
Styrene
monomer
Sulphur-related
products
Synthetic
crude oil
Transportation
fuels

Power is generated by co-generation within the region or


supplied through a power provider such as EPCOR and
delivered through the regions transmission and
distribution network. The transmission system serving the
Heartland area is currently being expanded to include a
new overhead double circuit 500kV transmission line,4
ensuring plenty of capacity for future growth.
The Edmonton Energy and Technology Parks
petrochemical zone is well connected to the major
highways to move goods and services east/west (Highway
16), north to key resource areas (Highway 63) and south
(Anthony Henday Drive to Highway 2) to U.S. markets.

Highlights of the Alberta Economy 2013, Government of Alberta


Albertas International Exports by Industry A 10-Year Review, May 2013
Government of Alberta, Economic Commentary, Which Sector is Albertas Largest Manufacturing Sector, Jan. 29, 2013
Heartland Transmission Project, 2013

4.5

SECTOR-SPECIFIC INDUSTRIAL ATTRIBUTES

Petrochemical sector
workforce, training
and R & D
Current labour rates are generally
2-6% lower than the Alberta average
for a range of occupations relating to
this sector. The following illustrates
sample wages:1
EDMONTON
HOURLY
Industrial instrument
technician

Northern Alberta Institute of


Technology (NAIT)

Largest apprenticeship training


program in Canada with capacity
to train 15,000 apprentices
annually in 33 trades

Certicate or diploma programs


linked to the petrochemical
industry include:

$34.11

Industrial engineer

$36.44

Chemical engineer

$49.68

University of Alberta

Home to a dozen key centres of


research excellence in resource
and processing-related elds

School of Business Natural


Resources and Energy MBA

Faculty of Engineering top 5%


of North American engineering
faculties and top 5% in chemical
engineering

features over 5,500 students,


over 200 professors and
50 research chairs

attracts over $50 million


annually from external
sources for sponsored
research funding

oers specialized degree


programs including a
Bachelor of Science in
Petroleum Engineering

Chemical Engineering
Technology

Engineering Design and


Drafting Technology

Instrument Technician

Materials and
Instrumentation Engineering
Technology

Occupational Health and


Safety

Local petrochemical support


organizations:

Albertas Industrial Heartland


Association

Strathcona Industrial
Association

Northeast Capital Industrial


Association

www.WAGEinfo, 2011 Alberta Wage and Salary Data

EDMONTONS | INDUSTRIAL | ASSETS

4.4

Highlights of the analysis showcase the opportunity.


Propylene/
polypropylene*

Methanol*

Ammonia/urea*

Integrated Ethylene,
Polyethylene and
Monoethylene Glycol*

Total xed investment


assumptions

$765 million
(combined)

$886 million

$609 million
(combined)

$2.5 billion
(Integrated
Ethylene Complex)

Annual cash cost/


metric ton (MT)
of output assumption

$1,035/MT

$182/MT

$185/MT

LDPE - $785/MT
HDPE - $703/MT
MEG - $420/MT

Annual global demand


growth to 2025

5%

8%

2%

LDPE 2.7%
HDPE 4 4.5%
MEG 1 1.5%

Primary growth markets for


Edmonton-based plants

U.S., Mexico

Canada, U.S.

Canada, U.S.

North America

South America

China

South America

South America

China

Indian
Subcontinent

Indian
Subcontinent

China

Price-competitive markets
for Edmonton-based
plants

Source: Business Case for Methanol, Propylene/polypropylene, Ammonia/Urea, , Polyethylene and Monoethylene Glycol, IHS Global, Inc., Albertas Industrial Heartland 2013
*Note: All three project models assumed to start in 2018, with a capital cost of 10%, life span of 30 years, tax rate of 25% and operating costs as noted

Access to Albertas liquid-rich shale gas reserves and the


forecasted long-term attractive natural gas price
contribute to very cost-competitive export netback pricing
and a double digit internal rate of return for new plants
processing any of these products.

To support value-added processing within Alberta,


Albertas Incremental Ethane Extraction Program provides
an incentive through royalty credits to encourage greater
production of ethane and promote value-added
petrochemical production.2

Comparing Edmontons and Albertas competitive position


with other producing markets, plants located here can
eectively compete when shipping any of these product
streams to North American markets especially
polypropylene whose delivered cost to the U.S. is
nearly $100/MT lower than product shipped from the
Middle East.

With easy access to agricultural or forestry-based


feedstock, new opportunities relating to bio-diesel,
ethanol and plant-based pulp and plastics are emerging.

Williams Energys Edmonton-area plant expansion


highlights growing interest in value-added processing in
the Alberta Industrial Heartland area. Their new facility
will be Canadas rst propane dehydrogenation (PDH)
facility and may be able to supply enough high quality
propylene feedstock to support at least one new worldscale petrochemical plant.1

1
2

Edmonton Journal, July 20, 2012


Incremental Ethane Extraction Program Report to the
Legislature, Oct. 24, 2011

Albertas deregulated energy market oers opportunities


for merchant power generation using traditional fuel
sources of coal or natural gas or converting excess heat or
steam from industrial processes.
Proximity to feedstock and a signicant research and
development community rounds out the business case for
producing these additives or products and positions
Edmonton as the key location for processing.
More details are available on the compelling business case
for these four streams by contacting Albertas Industrial
Heartland Association.

4.3

SECTOR-SPECIFIC INDUSTRIAL ATTRIBUTES

Conventional natural gas


and shale gas processing
Albertas conventional and shale
reserves oer producers both gas
sales and value-added processing
potential. Albertas shale reserves
are unique in that they have a higherthan-average percentage of natural
gas liquids key to processing
derivatives.

Petrochemical processing
opportunities
Investment in Albertas emerging
shale gas play is becoming more
attraction because of:

improved extraction
technologies, reducing
production challenges,

access to a strong domestic


market with growth potential in
targeted products,

competitive export price


potential for the near term,

ready access to U.S. and Asian


markets through current and
proposed west coast shipping
facilities and a North Americanwide rail and pipeline network,
and

Albertas Shale Gas Play

Muskwa
15 BILLION
BARRELS
NGL

Montney
29 BILLION
BARRELS
NGL

EDMONTON

Duvernay
11 BILLION
BARRELS
NGL

Source: Alberta Energy


Resource Conservation Board
Alberta Geological Survey

a political will encouraging local


value-added processing.

This emerging area of development is


well suited to build on the strength of
the current sector capacities.

Edmontons future in the


petrochemical sector and its related
supply and service business is very
bright. It builds on its proximity to
low-cost energy and feedstock, worldclass processing infrastructure,
expertise and a competitive business
climate. Abundant low-cost natural
gas and increased bitumen production
from the oil sands provides an extra
advantage to processing this
feedstock into higher value-added
products.
An analysis was undertaken for AIHA
in 2013 by IHS Global Inc. to assess
the competitive opportunities around
specic products. The results
illustrate business potential in key
sectors.
The detailed analysis was based on a
generic business case for siting,
building and operating petrochemical
plants in the Edmonton area that
process:
propylene/polypropylene,
methanol,
ammonia/urea, or
ethylene.

We are pleased to add to our acreage in this play


(Albertas Duvernay shale gas eld) as we advance our
program to evaluate the potential for full-eld
commercial development.1
Je Lehrmann, President, Chevron Canada Ltd., Aug. 1, 2013

Chevron Canada News Release, Aug. 1, 2013

EDMONTONS | INDUSTRIAL | ASSETS

4.2

Edmontons Energy and Technology Park oers industrial development


opportunities for greeneld petrochemical processing, industrial manufacturing,
logistics, research and development, engineering and other businesses that
support, supply and service the heavy industry located within Albertas Industrial
Heartland and resource companies located in the Edmonton service area covering
central and Northern Alberta.

Albertas Industrial Heartland (AIH) is Canadas largest hydrocarbon processing cluster.


World-class companies within or neighbouring AIH include: 1
Agrium Inc.
Air Liquide
Canada Ltd.
ATCO Energy
Solutions
Aux Sable
Canada Ltd.
Bunge Canada
Chemtrade
West Ltd.

Dow Chemicals
Canada ULC
Dow Agro Science
Evonik Degussa
Canada
Horton CBI
Imperial Oil
Keyera Energy
ME Global

North West
Redwater
Partnership
Pembina Pipeline/
Williams Energy
Canada Ltd.
Plains Midstream
Canada
Praxair Canada

Sasol Canada
Holdings Ltd.
Shell Canada Ltd.
Sherritt
International
Corporation
Smith & Nephew
(Alberta) Inc.
Sulzer Metco
(Canada) Inc.

Suncor Energy
Tervita Corporation
Umicore Canada
Univar
Western Asphalt
Western
Hydrogen Ltd.
Williams Energy
Canada Ltd.

Oil and bitumen-based processing


Alberta continues to develop its huge reserves of
conventional oil and oil sands while capitalizing on
processing these products and their by-products. Greater
Edmontons well-established renery and upgrader base
with industry leaders such as Imperial Oil, Suncor Energy
and Shell continue to upgrade, produce and ship a range of
petroleum products. These industries create signicant
supply and service opportunities from plant maintenance
and turnaround to demand for critical ingredients such as
the diluent needed to eectively pipe bitumen.
The North West Redwater Partnerships new rening
facility will upgrade bitumen into high-demand products
such as low carbon-standard diesel. It will also utilize
gasication technology to capture pure CO2 that will then
be sold to enhance oil recovery prior to deep, safe
underground storage.2
Improving access to current and new markets for petroleum
products is a priority for both the public and private sector
and a series of solutions are moving forward that will lead to
a strengthened bottom line for years to come.
1
2
3
4
5

Albertas Industrial Heartland


www.northwestupgrading.com
TransCanada News Release, Energy East Pipeline Project, Aug. 1, 2013
Keyera, News Release, July 30, 2013
TransCanada News Release, Aug. 1, 2013

TransCanadas proposed gas pipeline conversion, Energy


East Pipeline, will expand capacity to ship 1.1 million
barrels/day of crude oil into Eastern Canadian and
potentially European markets.3 This new service will
expand both domestic and export market potential.
Keyera Corporation and Kinder Morgan Energy Partners
L.P. have also announced the construction of the Alberta
Crude Terminal, designed to ship 40,000 barrels/day by
rail to any Canadian or U.S. market.4
Diversifying the transportation delivery system and
increasing the market diversication contributes to
optimizing the price secured for Albertas hydrocarbon
products and contributes towards a more favourable
business environment for future production and
processing.

This is an historic opportunity to connect


the oil resources of western Canada to the
consumers of eastern Canada, creating
jobs, tax revenue and energy security for
all Canadians for decades to come.5
Russ Girling, President and CEO, TransCanada, Aug. 1, 2013

EDMONTONS | INDUSTRIAL | ASSETS

4.6

Edmontons
competitive position
According to KPMGs Competitive
Alternative 2012 report, Canada
continues to rank well, oering a
3.4% cost advantage over the
U.S. in overall specialty chemical
manufacturing.
Edmonton mirrors this costcompetitive position with the
following specic advantages:

Annual year-to-year property tax savings in Edmonton


strengthen your bottom line
Siting industrial processing plants within the City of Edmonton oers
equipment-intensive plants a signicant annual tax cost advantage compared
to neighbouring jurisdictions that levy a mechanical and equipment (M & E) tax.
Using 2012 tax bylaw gures from three neighbouring municipalities, the
following shows the percentage tax increase over an Edmonton tax base for a
$5 billion project on a 100 acre site: 1

2% - 3% cost advantage over


key U.S. production hubs,
lowest property taxes of
9 comparable locations
including no machinery and
equipment (M & E) taxes
and no provincial sales tax,

EDMONTON SCENARIO
75% M & E
with 25% M & E
removed because it is
considered non-assessable

NEIGHBOUR 1

25% more

NEIGHBOUR 2 NEIGHBOUR 3

17% more

35% more

over 60 years of experience


working with rening and
petrochemical industries,
an established and growing
petrochemical production
cluster many major players
are here,
proximity to low-cost natural
gas and oil sands-related
feedstock,
skilled, experienced and
motivated workforce with
very low work stoppage and
unionization rates,
outstanding pipeline and rail
connections to multiple
markets,
ability to optimize utility
investments through cogeneration,

Research illustrates that the Edmonton area can


compete with global leaders in the processing of targeted
derivatives such as propylene and polypropylene
with lowest delivery costs to North American markets. 2

readily available industrial


land either zoned or
designated for a range of
industrial operations, and
a municipal and government
environment that is supportive
of responsible industrial
development.

Couple this with potential local feedstock coming on


stream from Williams Energys new propane
dehydrogenation (PDH) facility and you have a winning
combination for business success.

City of Edmonton Sustainable Development, 2013

Business Model, IHS Global Inc., Albertas Industrial Heartland Association, 2013